Macy’s has revised its profit forecast for 2025, pointing to the rising burden of tariffs and a softer consumer environment as key factors in its decision. The iconic department store now expects adjusted earnings per share to range between $1.60 and $2.00, down from its previous projection of $2.05 to $2.25.
The adjustment represents a significant recalibration as Macy’s works to manage the dual challenges of increasing operational costs and a sluggish retail environment. Executives noted that tariffs have shaved 15 to 40 cents off the company’s projected earnings per share, primarily due to increased costs associated with imported merchandise. Despite this, the company maintains its full-year sales forecast between $21 billion and $21.4 billion, though this is a step down from last year’s $22.29 billion in revenue.
Tariffs Driving Up Costs, Squeezing Margins
Tariffs imposed on goods imported from key manufacturing hubs have had a considerable impact on Macy’s bottom line. Retailers like Macy’s, which source a large portion of their inventory from overseas, face steeper costs that are either absorbed or passed along to consumers. Macy’s leadership has opted for selective price increases, carefully adjusting prices in certain categories while striving to maintain competitive pricing on popular items.
These changes come amid a backdrop of changing economic conditions. As inflationary pressures linger and disposable income shrinks, consumers have become more cautious in their spending. Luxury items, non-essentials, and higher-end fashion have seen dips in demand, creating a ripple effect throughout the department store sector.
Macy’s management has expressed concern that price increases, although necessary to offset tariff expenses, could further dampen consumer sentiment. Still, they see it as a necessary step to safeguard margins without undertaking more aggressive cost-cutting measures.
First Quarter Outperforms Expectations
Despite a challenging macroeconomic environment, Macy’s delivered a better-than-anticipated performance in the first quarter of 2025. The company reported adjusted earnings per share of 16 cents on $4.8 billion in revenue. These figures slightly surpassed analysts’ expectations, which had forecast earnings of 15 cents on revenue of $4.4 billion.
This modest success has provided some optimism, suggesting that Macy’s restructuring strategies are beginning to show early signs of traction. Nonetheless, the overall revenue figure reflects a decline from the $4.85 billion recorded during the same period last year, reinforcing concerns about decreasing foot traffic and waning consumer interest.
Turnaround Strategy Underway
To address long-term profitability, Macy’s is executing a sweeping turnaround plan led by CEO Tony Spring. Central to this strategy is the planned closure of 150 underperforming stores by 2027. The aim is to consolidate the retailer’s footprint and focus on high-performing locations, optimizing the customer experience in markets with stronger demand.
Additionally, Macy’s is investing in the revitalization of its Bluemercury and Bloomingdale’s divisions. These luxury and beauty-focused brands have demonstrated greater resilience in recent quarters. Comparable sales at Bloomingdale’s rose 6.2%, while Bluemercury posted a 4.8% increase, signaling consumer willingness to spend on high-end, experiential shopping even amid broader cutbacks.
Digital innovation is also a cornerstone of the retailer’s future. Macy’s has increased investment in its e-commerce platform and mobile shopping app, aiming to provide seamless omnichannel experiences. Enhanced product discovery tools, faster checkout options, and personalized recommendations are all part of the push to capture more market share online.
Retail Landscape Shifting
Macy’s challenges are emblematic of broader shifts in the retail landscape. Department stores are contending with fierce competition from fast-fashion brands, big-box retailers, and e-commerce giants. With changing customer preferences and digital-first shopping behaviors becoming the norm, legacy brands are being forced to evolve or risk obsolescence.
In response, Macy’s has begun diversifying its supply chain to reduce reliance on regions most impacted by tariffs. It is also rethinking store layouts, investing in smaller-format stores, and experimenting with localized inventory assortments to better serve community-specific tastes.
The company’s efforts are being closely watched by analysts and investors alike. While the revised profit forecast reflects near-term headwinds, Macy’s leadership believes the foundation is being laid for sustainable growth in the years ahead.